Financing Options Available for First-Time Homebuyers

The entire process of buying a home for the first time can be extremely overwhelming. In addition to all of the paperwork, the expenses involved rapidly add up and become daunting as well. On the plus side, there are many grants and programs available to assist first-time homebuyers with this process.

Some of the options available nationwide include FHA loans available through the Federal Housing Administration (FHA), an agency that operates within the U.S. Department of Housing and Urban Development (HUD), which insures the mortgage and lenders receive a layer of protection that will protect them from experiencing a loss if the borrower ends up defaulting on the mortgage. FHA loans typically offer competitive interest rates, a reduced down payment, and lower closing costs. Borrowers with a credit score of 580 or higher could be eligible for a mortgage with a down payment as low as 3.5 percent.

Also, USDA loans provide a homebuyer assistance program of the U.S. Department of Agriculture focuses on residences in certain rural areas. Through this program, the borrower does not need to purchase or run a farm to be eligible, the USDA guarantees the loan, there may be no down payment required, and the loan payments are fixed. USDA loan program applicants with a credit score of 620 or higher typically receive streamlined processing.

Other programs available include:

VA loans through the U.S. Department of Veterans Affairs and this program assists service members, veterans and surviving spouses in the process of purchasing a home.

Good Neighbor Next Door, which is sponsored by HUD and focuses on providing housing aid for law enforcement officers, firefighters, emergency medical technicians and teachers.

Fannie Mae or Freddie Mac have a program through which they work with local lenders to offer mortgage options that benefit low- and moderate-income families.

Energy Efficient Mortgage is a program that allows one to add improvements to their home that will make it more environmentally friendly. The federal government supports Energy Efficient Mortgage loans by insuring them through FHA or VA programs.